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Qantas claims deal on the Tasman will keep fares low!
Qantas CFO Peter Gregg has claimed that Qantas’ codeshare with Air New Zealand is essential to keep airfares across the Tasman low, insisting the arrangement would not mean fare price hikes, adding that the number of empty seats on the Trans-Tasman route was “not sustainable”.
But aviation analyst Professor Tim Hazledine has warned that fares could rise up to 25% because the plan involves joint scheduling and pricing.
Mr Gregg said, “We believe and we’ve maintained that there is adequate competition on those routes, and if we take too much capacity out, I can bet you next week’s salary or next year’s salary that the opposition will step into that space,” he said. “That’s what happens in our industry. It’s a capacity-driven business.”
However, Prof Hazledine, an economics professor at Auckland University, said his work showed that monopoly situations produced higher fares than the demand created by fewer seats.
His survey of 1,000 flights showed routes without two big independent carriers had fares which were 15% higher. He said, basically it’s fairly simply: the more competition on the route, the lower the price.” “The airlines have successfully run a codeshare arrangement before without coordinating scheduling and prices”.
Mr Gregg said though that the previous codeshare deal had occurred when Qantas was a 25% stakeholder in Air NZ, which he described as “a completely different environment”.
Mr Gregg added, “The Tasman is one of the most liberal markets in the world”. “You have two countries that allow foreign carriers to come in and set up domestic airlines”. “There’s nowhere that I’m aware of anywhere in the world that allows that to occur and those carriers can then compete on the Tasman.”
The airlines are seeking approval from Australia’s competition watchdog, and from New Zealand’s Transport Minister to bypass the Commerce Commission, but they are also receiving little support from the travel industry, with the consensus that the codeshare will result in fares going up.
Report by The Mole
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